The Australian dollar had a choppy back and forth type of situation form on Monday, as we gapped lower, then bounced to find resistance at the 0.7450 level. After that, we fell down to the 0.7425 level, and then bounced again. This is a market that has been in a downtrend recently, and I believe it is only a matter of time before we break down significantly in go down to the 0.70 level underneath. If we can break above the 0.7450 level, the market will probably try to get towards the 0.75 handle. Keep in mind, Gold markets can have an influence on this pair, but it also depends on why gold markets are moving. After all, Gold markets can move for several different reasons.
Gold and its influence
If the gold markets rally based upon risk appetite, that’s very good for the Australian dollar. However, if gold rallies because of a safety trade, especially on things like headlines out of North Korea that spooked the market, that tends to work against the Australian dollar, because the Australian dollars considered to be a “risky” currency. Currently, it looks as if the gold rally has more to do with trying to find safety than trying to speculate on economic growth. Because of this, I believe that the Australian dollar continues to struggle, and that it is only a matter of time before we do get the breakdown that I had mentioned previously. That breakdown could send this market much lower, but it is probably going to be very choppy, as the Australian dollar has been for some time. Nonetheless, I still believe that the US dollar is much better tone than the Australian dollar in the immediate future going forward.
Written by FX Empire